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Earnings Preview: Omnicom Group - Analyst Blog

Omnicom Group Inc.(OMC)
will report its fourth-quarter and FY11 earnings on Tuesday,
February 14, 2012.

The current Zacks Consensus Estimate for earnings per share (
EPS
) is 95 cents, representing an annualized growth rate of 13.99%.

With respect to earnings surprises, over the trailing four
quarters, OMC outperformed the Zacks Consensus Estimate in all the
quarters. The average earnings surprise was 6.66%, implying that
the company outperformed the Zacks Consensus Estimate by the same
magnitude over the last four quarters.

Third-Quarter Highlights

On October 18, Omnicom Group posted decent operating results for
the third quarter of 2011.

Omnicom's net income in the quarter grew 16.7% year over year to
$203.7 million from $174.6 million in the third quarter of 2010.
Earnings per share (
EPS
) expanded by 26.3% from 57 cents in the year-ago quarter to 72
cents in the reported quarter. EPS also beats the Zacks Consensus
Estimate of 70 cents.

Total revenue was $3,380.9 million, up 12.9% year over year from
$2,994.6 million in the corresponding quarter of the previous year.
Revenue surpassed the Zacks Consensus Estimate of $3,293.0 million.
Domestic and International revenue rose 5.3% and 21.8% to reach
$1,703.2 million and $1,677.7 million, respectively.

Agreement of Estimate Revisions

In the last 30 days, one analyst increased the company's
earnings per share (
EPS
) estimate for the fourth quarter of 2011 while three analysts
decreased the same for the quarter. However, for fiscal 2011, one
analyst raised its estimate while two decreased the same. For
fiscal 2012, two analysts increased estimate in the last 30 days,
while 3 decreased the same.

Magnitude of Estimate Revisions

Estimates over the last 30 days remained static at 95 cents for
the fourth quarter of 2011, representing a year-over-year growth of
13.99%.

Estimate for fiscal 2011 remained static at $3.30 over the last
30 days. For fiscal 2012, the average remained static at $3.65, as
the positive and negative movements of the analyst estimates had an
offsetting effect on each other over the last 30 days. These
estimates represented a year-over-year growth of 22.35% for 2011
and 10.42% for 2012.

Recently, Omnicom Group Inc. announced the increase of the
company's quarterly cash dividend by 20%, raising it from 25 cents
to 30 cents per outstanding share of the company's common
stock.

The company's board has declared a dividend of 30 cents per
share, which is payable on April 2, 2012 to Omnicom Group common
shareholders of record at the close of business as of March 5,
2012.

Our Take

Omnicom is likely to foresee revenue growth, on the backdrop of
improving US and international ad market, fueled by rising consumer
spending. Moreover, the company's customized, cost effective
business mix alongside acquisitions and client base expansion
appear favorable.

Omnicom is one of the largest advertising, marketing and
corporate communications companies in the world extending
customized mix of traditional media advertising; customer
relationship management (
CRM
), public relations (PR), and specialty communications services in
all the major markets across the globe. It directly competes with
its peers, such as
The Interpublic Group of Companies Inc.
(
IPG
),
Publicis Groupe SA
(
PUBGY
.PK) and
WPP plc
(
WPPGY
).

We currently maintain a long-term Neutral recommendation on the
stock. The company has a Zacks #3 Rank, which translates into a
short-term Hold rating (1-3 months).

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